Index Wrap, Monday, 12/29/2003

Raging Bull rocks Wall Street

by Jeff Bailey

On Wednesday of last week, it was mad-cow disease that may have
had the Dow Industrials (INDU) 10,450 +1.21% suffering its first
losing session in 7 days, but a strong case of raging bull and
few sellers with just 2 days remaining in 2004 found the major
indices closing at new 52-week high, with the Dow Industrials
closing at its highest level since in 21 months.

The very NASDAQ Composite (COMPX) 2,006.48 +1.68%, and larger-cap
NASDAQ-100 Index (NDX.X) 1,470.37 +1.83% broke to new 52-week
highs as though a recent quarantine of resistance from late
November was lifted.

U.S. Market Watch - 12/29/03 Close

The AMEX Gold Bugs Index ($HUI.X) 246.19 +3.88% was today's
sector winner, as the dollar continued its torrid decline against
the euro, with the euro breaking above 1.25 against the dollar
for the first time ever. I view today's strong move back above
the $HUI.X's 21-day SMA of 240 as bullish, after a successful
test of its rising 50-day SMA of 225 early last week. Support
should be firm at the 220 level with bullish targets at 257.50
(early December highs) and 274.25 (from fitted retracement).

Treasuries were under pressure in today's session, with some bond
traders quipping that prices were "falling like a dollar."
Declines in Treasuries came after a $31 billion auction of 3 and
6-month bills brought new supply to the market, which fetched
rates of 0.885% and 0.995% with bid-to-cover ratios of 1.95 and
2.31, respectively.

Equity traders thought there might have been some continued 2004
asset allocations being implemented in stocks, specifically in
the S&P 500 (SPX.X) 1,109.48 +1.24%. The Wall Street Journal's
"Heard on the Street" column suggested dividend stocks could
become favorites for 2004. Since President Bush signed the bill
in May that slashed dividend-tax rates by more than 50% for many
investors, companies have hopped on the dividend payout
bandwagon. Companies in the S&P 500-stock index are expected to
pay a record $160.6 billion in dividends to shareholders in 2003,
which is up from $147.8 billion last year, a previous record.
According to the Wall Street Journal article, 21 companies, with
Microsoft (NASDAQ:MSFT) $27.46 +0.91% and Best Buy (NYSE:BBY)
$52.19 +3.22% as examples, have started paying dividends for the
first time.

In the above U.S. Market Watch screen capture from my QCharts
charting software, I've shown not only today's percentage gains
for the major indices, but also the 5-day and 20-day percentage
changes, where perhaps the percentage out performance for the
last 20-days for the Dow Industrials (INDU), S&P 500 (SPX.X) and
S&P 100 Index (OEX.X) over the NASDAQ-100 Index (NDX.X) and
smaller-cap Russell-2000 Index (RUT.X) may be attributed to some
institutional favor showing up for a 2004 dividend strategy.

Market Snapshot / Internals - 12/29/2003 Close

Today's economic calendar had only the Conference Board's Help
Wanted Index for November being released at 10:00 AM EST, where
its 39 reading, which was above economists' forecast of 38 did
have the SPX trading a morning high of 1,102.65, which didn't
seem to be a market moving economic release as the SPX then
pulled back below the 1,100.00 level soon after. However, that
brief dip back below 1,100.00, which lasted all of 10-minutes was
quickly bid back higher as the major indices built gains to their
close. Today's 614 new 52-week highs on the NYSE comes close to
its 619 new highs set on December 1. NASDAQ's 300 new highs
shows some resumption of bullish leadership present among 4 and
5-lettered stocks listed on the NASDAQ, but still shy of the 453
new highs found on December 1, 2003.

Current 10-day NH/NL ratio averages has the NYSE at 97.7% (bull
confirmed) and closing in on a recent high reading of 98.5% found
on December 9th. The NASDAQ 10-day NH/NL ratio average is 93.2%
(bear confirmed) and nearing a recent relative high reading of
95.2%. It would currently take a reversing upward 10-day average
ratio of 96% for the NASDAQ NH/NL ratio to achieve "bear
correction" status for this indicator of bullish leadership.

Volumes at both the NYSE and NASDAQ were light, depicting holiday
trade.

Pivot Analysis Matrix -

The NDX and QQQ took their time, but with just two days left in
the month, the NDX/QQQ saw trade at their MONTHLY R1s, as the
other major indices continued their torrid pace higher. With all
the major indices at new 52-week highs, and traders looking
rather unwilling to sell and padding gains into year's end, I'd
have to view the WEEKLY Pivots as solid support after seeing
trade at the WEEKLY R2s.

I thought swing trade bulls in the QQQ might have "sold a top"
and took some short-term profits off the table when the Q's
traded $38.26 in the first 50-minutes of trade as the Q's pulled
back to $36.07 at the 11:00 AM EST mark, but when a new session
high was traded the WEEKLY R1 quickly became support.

The trade I would look for tomorrow, from the bullish side for
another short-term bullish trade would be in a QQQ pullback near
its DAILY S1 ($36.13), place a stop under DAILY S2 of $35.82, and
target a December 31 close of $37.00. A shorter-term bull might
like this trade based on the Stock Trader's Almanac notes that
the last day of the year (Wednesday) has seen bullish trade 29 of
last 32 years. I will note the Stock Trader's Almanac notes the
Dow Industrials (INDU) traded down 5 of last 7 on the last day of
the year.

With the other major indices (INDU/SPX/OEX) now further above
their MONTHLY R2s, I would have to view their WEEKLY Pivots as
firm support levels until we get new MONTHLY levels at the
conclusion of Wednesday's trade.

NASDAQ-100 Tracking Stock (AMEX:QQQ) - Daily Intervals

The Semiconductor Index (SOX.X) 510.48 +2.36% and positive
morning comments within the sector by Smith Barney helped the QQQ
gap back above our upward trend from the March lows, where a
quick check of an intra-day chart shows this upward trend now
residing at $36.03. I'm still rather uncertain what to expect in
January as it relates to any "tax-gain selling," but with the QQQ
breaking above its November 7th high of $36.18, I think a
disciplined bull could look to play another QQQ long on a
pullback near tomorrow's DAILY S1. The QQQ was stronger than my
bullish swing trade target of $36.25 and if bulls are looking to
send the major indices out on a high note by year's end, then the
QQQ would be the index closest to break-out support.

S&P 500 Index (SPX.X) Chart - Daily Intervals

The SPX is breaking above all resistance that I could possibly
come up with. Further gains above today's highs would find some
technical resistance appearing near 1,130. I would have thought
1,105 from WEEKLY R2 and perhaps a relative high of 1,106.59 from
May 17, 2002 might find some sellers, but that wasn't the case in
today's trade.

Dow Industrials (INDU) Chart - Daily Intervals

A bear's worst nightmare is represented in the INDU, if not the
SPX at this point. First sign of any real weakness would be a
decline back below 10,300 in my opinion. I refuse to try and
pick a top in the INDU and I think some bears have given up too.